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Survey Finds Political Risk and Financing Key Challenges Facing Infrastructure Industry: Marsh

Posted on 27 Jul 2012 by Neilson

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MarshMore than half (53%) of infrastructure industry professionals surveyed said that political risk in North America is a significant factor in making infrastructure investment decisions, and a significant majority (85%) said the industry needs better tools for identifying, quantifying, and mitigating project risk.

The survey participants were attendees at Marsh & McLennan Companies’ 2012 North America Infrastructure Risk Conference: “Balancing Public Investment and Private Investment Risk.” The conference included several panel discussions, during which Marsh polled attendees about several facets of infrastructure risk.

The results of the polls are included in our Infrastructure Risk Survey report to a provide snapshot of current industry perspectives on the nature and breadth of infrastructure project risks. We summarize the report’s findings below.

Good Projects Increasingly Difficult to Finance

Three in four of the professionals surveyed agreed that good infrastructure projects are becoming harder to finance and that non-traditional capital providers (e.g. pension funds, public/private trusts) will be needed to fill the financing gap.

While nearly all (94%) of the respondents said risk must be shared between the public and private sectors, most respondents (85%) said that stakeholders lack the proper tools for identifying, quantifying, and mitigating project risk.

Respondents Split on Sharing Revenue Risk

Though nearly all respondents reported that revenue risk has become more critical since the economic downturn, they disagree about who should bear such risk. Almost half said project sponsors should take more responsibility for project risk; a third said investors should shoulder the burden.

Attempts to De-Risk Credit Environment Fall Short

Nearly two in three survey participants said they are skeptical about the effectiveness of regulatory attempts such as such as Dodd-Frank and Basel III to de-risk the credit environment. Moreover, 60% say they think “bad deals” will still be refinanced.

Sustainability More Opportunity Than Threat

Sustainability presents more opportunities than threats, said nearly four in five survey respondents. Yet more than three-quarters said that they do not fully understand sustainability, nor do they have the tools in place to determine its financial implications in infrastructure projects.